Eurozone in deflation US on course for mid 2015 rate rise

The euro is still under pressure from yesterday’s inflation data shows that the eurozone has fallen into deflation. The ECB now looks set to act on QE in the 22nd January meeting.

Today the EU retail sales will be released expecting a slight drop to 0.3% from 0.4%. German retail sales were released yesterday and were better than expected but still lower than the last read.

EUR/USD currently trading just above 1.1800 finding a lot of support but looking very weak as we start the day.

The US dollar still continues its dominance against most majors, with the help of good data yesterday, a smaller trade deficit than expected, and the ADP data coming out better.

Last night’s FOMC minutes didn’t have much effect on the release as the wording was pretty much the same: the added rate rise is unlikely before April, and there was a mention that the oil decline will likely be positive for the economy.

Today the unemployment claims will be released and are expected at 291k, down from 298k.

In the UK, the bank rate will be announced. And is expected to be unchanged at 0.5%, with asset purchases at 375b.
GBP/USD is currently trading below 1.5100 and struggling to deal with the strength of the USD and the weakness in the euro.

The Aussie and the yen were the main movers overnight, with AUD building approvals surprising the market pushing the AUD/USD back above 0.8100. Yen weakened against the USD as it followed the strength in the Nikkei.

There’s overnight data from Australia and China to watch, with Aussie retail sales expected at 0.3% and Chain CPI the main one that will move the markets today: expected up at 1.5% from previous 1.4%.

EUR/USD

Supports  1.1790 1.1750 1.1700  | Resistance  1.1890 1.1940 1.1980

USD/JPY

Supports  118.80 118.25 117.80 | Resistance  119.70 120.15 120.70

GBP/USD

Supports 1.5055 1.5000 1.4955  | Resistance 1.5155 1.5200 1.5260